AUD/USD recovered from a dip to 0.7100 on Thursday to settle near 0.7150, after Australia’s Q1 private capital expenditure surprised at 6.5% quarter-on-quarter versus 1.0% expected. Equipment, plant and machinery jumped 18.1%, with the ABS pointing to data centre construction, while 2026-27 capex estimates were lifted by nearly 10%. That strength contrasted with weaker domestic demand: April household spending fell 1.1% month-on-month, more than double forecasts. In the US, April core PCE inflation held at 3.3% year-on-year, while the monthly print eased to 0.2% against 0.3% expected; headline PCE rose to 3.8%, the highest since May 2023.
Markets absorbed the PCE release with limited repricing, leaving CME FedWatch at roughly a 50/50 split on at least one Fed hike by year-end, and the US Dollar failed to break the 0.7100 area. Technically, the daily 50-period EMA sits near 0.7100 and held, while daily Stoch RSI is turning down from overbought; resistance remains around the earlier-month high near 0.7300. Near-term focus shifts to China’s NBS PMIs on Sunday, Powell on Monday, Australia’s Q1 GDP on Wednesday, and US NFP on Friday.
AUD/USD Support and Investment Flows
We see the Aussie dollar holding a key support level around 0.7100, which proved solid this week. This resilience comes from a surge in business investment that is hard to ignore, even as the consumer is clearly pulling back. The mixed data likely keeps the Reserve Bank of Australia on the sidelines, providing a yield floor for the currency.
The powerhouse behind this is the data center boom, which pushed Q1 capital spending up a massive 6.5%. Recent industry reports confirm Australia’s data center market is set to grow over 5% annually, with Sydney now a top-five hub in the APAC region. This long-term investment cycle is a structural positive that we believe the market is under-pricing.
U.S. Inflation, Event Risk, and Trading Strategies
On the other side of the pair, U.S. inflation isn’t forcing the Fed’s hand, with the latest Core PCE print of 3.3% well off the peaks seen in prior years. The CME FedWatch tool confirms the market is split 50/50 on another rate hike this year, meaning the U.S. dollar lacks a clear catalyst. This puts the focus squarely on next week’s Nonfarm Payrolls report to shift expectations.
Given the solid support at 0.7100 and major event risk ahead, we are looking at options strategies to trade the expected chop. One-week implied volatility has already risen to 9.5% ahead of next week’s Australian GDP and U.S. jobs data. Buying straddles or strangles could be an effective way to play a potential breakout from the current range.
For directional plays, we are using the 0.7100 level as our line in the sand for short-term long positions. A break below that level on a daily closing basis would likely see a swift move toward 0.7000. Our upside targets remain 0.7250 and the cycle high near 0.7300, which we would look to sell into without a fresh bullish catalyst.
